Inflation up in German states, pointing to national rise

INFLATION rose in five economically important German states in the month of June, preliminary data showed on Thursday (Jun 29), suggesting a bumpy road ahead for German inflation.

The inflation rate rose to 6.2 per cent in North-Rhine Westphalia and Bavaria, while rising to 6.7 per cent in Brandenburg, 6.1 per cent in Hesse and 6.9 per cent in Baden-Wuerttemberg.

In May, inflation rates for those five states, out of 16 in Germany, stood at between 5.7 per cent and 6.6 per cent.

The data from Germany, the eurozone’s biggest economy, comes as the European Central Bank is still looking for evidence that inflation has turned a corner. June inflation data for the bloc is due on Friday.

In June of last year, in a bid to counter rising energy prices, the German government cut fuel tax and introduced a ticket allowing travel across the country for nine euros (S$13.30) a month. As a consequence, German inflation dipped in June 2022.

A year-on-year increase is expected in the figure for June 2023 due to the base effect from lower prices a year ago due to government relief measures.

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A new subsidised travel ticket covers all local public transport for 49 euros per month, but the price is significantly above the nine euros of the travel ticket in place during the summer months last year.

The ECB has lifted rates by a record 400 basis points over the past year, and is forecast to raise rates in July and September. REUTERS